Classification of Cash Flows
Fannin Company is a manufacturer of premium athletic equipment. Fannin reported the following inflows and outflows of cash during 2019.
Fannin had cash on hand at 1/1/2019 of $118,250.
Required:
1. Prepare a properly formatted statement of cash flows using the indirect method.
2. CONCEPTUAL CONNECTION What can you conclude by examining the patterns in Fannin’s cash flows?
(a)
A cash flow statement is a budget report that gives total information in regard to all cash inflows an organization gets from its continuous tasks and outside venture sources, just as all cash outflows that compensation for business activities and speculations amid a given period.
To compute:
Prepare a properly formatted statement of cash flows the indirect method.
In the books of Fannin Company
Prepare the cash flow statement:
Particular | Detail ($) | Amount ($) |
Net income | 594600 | |
Depreciation expense | 93410 | 93410 |
Operating profit before working capital changes | 688010 | |
Less: increase in accounts receivable | (23400) | |
Add: decrease in inventory | 61250 | |
Add: decrease in prepaid insurance | 47600 | |
Less: Decrease in accounts payable | (31550) | |
Add: Increase in wages payable | 18200 | |
Less: Decrease in income taxes payable | (7600) | 64500 |
Operating cash provided | 752510 |
(b)
Checking cash flow is critical to a sound business. A cash flow statement examination is a profound jump into your business' budgetary wellbeing and is an approach to investigate your cash flow in and out all through a given timespan.
To discuss:
What can you conclude by examining the patterns in Fannin Company cash flows?
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